Cybersecurity innovations are helping companies and governments across the world protect their data and assets from cyberattacks. This has resulted in increased investments by industry-leading companies to create the best solutions and has boosted the cybersecurity market.
Given this backdrop, investors could invest in fundamentally sound software security stocks Fortinet, Inc. (FTNT), Tenable Holdings, Inc. (TENB), and Check Point Software Technologies Ltd. (CHKP) for substantial gains.
With the rapid adoption of the latest technologies and digitalization, which are aiding operations, enhancing efficiency, and offering higher productivity, concerns related to cyber security are also gaining attention. Incidents of cyber threats are growing swiftly, urging companies to invest and develop systems to safeguard and protect their customers.
With new vulnerabilities emerging even before the old ones are subdued, cyberattacks are harming organizations of all scales. Cloud environment intrusions have increased by 75% in the past year, whereas cloud-conscious cases have increased by 110%. Also, ransomware attacks are on the rise in the United States, with 59% of all ransomware attacks taking place there.
The need for improved cybersecurity solutions and measures is growing every day, resulting in more and more companies investing and undertaking R&D to innovate. Amid this, the global cybersecurity market is experiencing robust growth.
According to Fortune Business Insights, the global cybersecurity market is projected to grow to $562.72 billion by 2032, exhibiting growth at a CAGR of 14.3%. Also, the U.S. cyber security market is expected to reach around $166.73 billion in 2032. The global market is driven by the rising number of e-commerce platforms and the growing integration of technologies like AI, ML, IoT, and cloud.
Considering the industry’s conducive trends, let’s examine the fundamentals of the three Software - Security stock picks, beginning with the third choice.
Stock #3: Fortinet, Inc. (FTNT)
FTNT provides cybersecurity and convergence of networking and security solutions internationally. The company offers secure networking solutions, network firewall solutions, wireless LAN solutions, and secure connectivity solutions. It also provides the Fortinet Unified SASE solutions.
On December 3, FTNT launched FortiAppSec Cloud, a new cloud-delivered platform for integrating key web application security and performance management tools into a single offering.
Along with consolidating key web application capabilities into a single offering, FortiAppSec Cloud also provides cutting-edge protection, seamless delivery, and centralized management across multi-cloud environments. This offers customers confidence in securing and managing their hybrid and multi-cloud environments.
On November 15, FTNT expanded its global presence with the opening of its new innovation hub in Atlanta, Georgia. The newly acquired 10-story building will be transformed into the newest Innovation Hub of the company and will drive innovation and strengthen collaboration for its customers, partners, employees, and other key stakeholders around the world.
For the third quarter that ended September 30, 2024, FTNT’s total revenue increased 13% year-over-year to $1.51 billion. Its non-GAAP operating income grew 46.7% from the year-ago value to $544.70 million. The company’s non-GAAP net income was $487.60 million or $0.63 per share, up 50.7% and 53.7% from the prior year’s period, respectively.
Furthermore, the company’s free cash flow rose 18.8% from the previous year’s period to $571.80 million.
Projecting on its strong quarter performance, the company provided guidance for the fourth quarter of 2024, expecting revenue in the range of $1.56 billion to $1.62 billion. Also, its non-GAAP net income per share is expected to be $0.58 - $0.62.
Also, for the fiscal year 2024, Fortinet currently expects revenue in the range of $5.86 billion to $5.92 billion and service revenue of $4.01 billion to $4.04 billion. And its non-GAAP net income per share is set to be $2.20 to $2.28.
Street expects FTNT’s revenue and EPS for the fourth quarter (ending December 2024) to increase 12.7% and 19.1% year-over-year to $1.59 billion and $0.61, respectively. Further, the company has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
Shares of FTNT have gained 66% over the past six months and 91.4% over the past year to close the last trading session at $99.21.
FTNT’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
FTNT has an A grade for Sentiment and Quality. It is ranked #7 out of 20 stocks in the B-rated Software - Security industry.
In addition to the POWR Ratings we’ve stated above, we also have FTNT ratings for Momentum, Value, Stability, and Growth. Get all FTNT ratings here.
Stock #2: Tenable Holdings, Inc. (TENB)
TENB is an international cyber exposure solutions provider. The company’s platforms include Tenable Vulnerability Management, Tenable Cloud Security, Tenable Identity Exposure, Tenable Web App Scanning, Tenable Lumin Exposure View, Tenable Attack Surface Management, Tenable Security Center, and Tenable OT Security.
On December 4, TENB released Tenable Patch Management, an autonomous patch solution built to quickly and effectively close vulnerability exposures in a unified solution. Created with a strategic partnership and integration with Adaptiva, the solution addresses the critical challenges of vulnerability remediation.
It shortens the time from discovery to remediation by examining the most impactful vulnerabilities across different environments. It also offers features like autonomous patching, which streamlines discovery to remediation, and customizable controls that prevent problematic updates.
On October 15, TENB launched new data security posture management (DSPM) and artificial intelligence security posture management (AI-SPM) capabilities for Tenable Cloud Security, the actionable cloud security solution. With the exposure management capabilities for cloud data and AI resources, Tenable Cloud Security reduces risk to two of the biggest emerging threats.
During the third quarter that ended September 30, 2024, TENB’s revenue increased 12.7% year-over-year to $227.09 million. Its non-GAAP gross profit was $184.82 million, up 14.2% year-over-year. Also, the company’s non-GAAP income from operations rose 23% from the prior-year quarter to $44.98 million.
Furthermore, the company’s non-GAAP net income and non-GAAP EPS of $39.32 million and $0.32 reflects growth of 42.1% and 39.1% from the prior year’s quarter, respectively.
As per its guidance for the fourth quarter of fiscal 2024, TENB forecasts non-GAAP income from operations of $47 million to $49 million. It expects its non-GAAP net income to be $42 million - $44 million and its non-GAAP EPS between $0.33 and $0.35.
Also, for the full year 2024, the company expects non-GAAP income from operations of $171.80 million to $173.80 million. Non-GAAP net income ranges from $149.90 million to $151.90 million. Its non-GAAP EPS is set to be at $1.21 - $1.23.
For the fourth quarter ending December 2024, analysts expect TENB’s revenue to increase 8.7% year-over-year to $231.81 million. For the ongoing quarter, the company’s EPS is expected to grow 37.8% year-over-year to $0.34. Moreover, the company surpassed the consensus revenue and EPS estimates in all four trailing quarters.
The stock has gained 2.8% over the past month and 4% over the past six months to close the last trading session at $42.42.
TENB’s promising outlook is reflected in its POWR Ratings. It has an overall rating of B, translating to a Buy in our proprietary rating system.
The stock has an A grade for Growth. Within the same industry, TENB is ranked #5 of 20 stocks.
To access additional ratings of TENB for Sentiment, Momentum, Stability, Value, and Quality, click here.
Stock #1: Check Point Software Technologies Ltd. (CHKP)
Headquartered in Tel Aviv, Israel, CHKP develops, markets, and supports a range of products and services for IT security globally. It offers a multilevel security architecture, cloud, network, mobile devices, endpoint information, and IOT solutions.
On November 20, CHKP launched the new Check Point Quantum Firewall Software R82 (R82) and additional innovations for the Infinity Platform. The new R82 delivers new AI engines, post-quantum encryption, and accelerated DevOps with greater simplicity for data center operations. The new solution will prevent against zero-day threats and empower customers.
On October 1, CHKP completed the acquisition of Cyberint Technologies Ltd., a provider of external risk management solutions. With the integration of Cyberint’s real-time exposure analysis into the Infinity Platform, CHKP could enhance its threat prevention capabilities, broaden market reach, and position itself for stable growth.
CHKP’s total revenues increased 6.5% year-over-year to $635.10 million during the third quarter that ended September 30, 2024. Its security subscription revenues grew 11.5% year-over-year to $276.90 million. The company’s non-GAAP operating income rose 1.9% from the year-ago value to $274 million.
In addition, the company’s non-GAAP net income and EPS totaled $255.40 million and $2.25, indicating increases of 5.4% and 8.7% from the prior year’s quarter, respectively.
Street expects CHKP’s revenue for the fourth quarter (ending December 2024) to increase 5.3% year-over-year to $698.43 million. The consensus EPS estimate of $2.65 for the same quarter indicates a 3.3% improvement year-over-year. Also, CHKP has topped the consensus revenue and EPS estimates in three of the trailing four quarters.
CHKP’s stock has surged 20.7% over the past six months and 29.3% over the past year to close the last trading session at $186.82.
CHKP’s POWR Ratings reflect its bright outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has an A grade for Quality. It is ranked #4 out of 20 stocks in the B-rated Software - Security industry.
Click here to access other CHKP ratings (Growth, Value, Stability, Sentiment, and Momentum).
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FTNT shares were trading at $97.06 per share on Monday afternoon, down $2.15 (-2.17%). Year-to-date, FTNT has gained 65.83%, versus a 28.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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